Monday, May 6, 2013

US GDP Overview: Manufacturing

Continuing with our look at the current state of the US economy, let's turn to the manufacturing sector, starting with the latest ISM report:

"The PMI™ registered 51.3 percent, a decrease of 2.9 percentage points
from February's reading of 54.2 percent, indicating expansion in
manufacturing for the fourth consecutive month, but at a slower rate.
Both the New Orders and Production Indexes reflected growth in March
compared to February, albeit at slower rates, registering 51.4 and 52.2
percent, respectively. The Employment Index registered 54.2, an increase
of 1.6 percentage points compared to February's reading of 52.6
percent. The Prices Index decreased 7 percentage points to 54.5, and the
list of commodities up in price reflected far fewer items than in
February. In addition, the Backlog of Orders, Exports and Imports
Indexes all grew in March."

Overall, the sector is still in expansion, albeit at a slower pace in the latest report. Here's a graph of the relevant data:

Overall, the ISM index has been above the 50 mark for over three years, with the exception of a few data points. Put another way, manufacturing has been doing well for a majority of the expansion.

With the exception of a few dips, the new orders index has also been showing expansion for about three and a half years.

And the overall business activity index has been strong as well, printing between 55 and 60 for over three years.

Let's turn to the ISMs anecdotal quotes:

"Beginning to feel the seasonal upswing in business — energy and
resin remain a concern." (Food, Beverage & Tobacco Products)

"While the second half of 2013 looks promising, the first half is a mixed bag." (Computer & Electronic Products)

"Things seem slightly better than last year, but still not great." (Printing & Related Support Activities)

"Automotive is still very strong." (Fabricated Metal Products)

"Post-election in the U.S. — companies within the oil and gas sector
are still waiting for signs of some regulatory certainty or stability."
(Petroleum & Coal Products)

"Reduced government spending in the defense sector lowers business output." (Transportation Equipment)

"Business is continuing to be brisk." (Furniture & Related Products)

"Market continues to be strong, and our production is exceeding plans at this time." (Wood Products)

"Sales are low, even adjusted for seasonal variation." (Chemical Products)

The quotes are a mixed bag. Some sectors are hurting (defense, oil and gas, computer and electronics, chemical products), while others are doing a bit better (food and beverage and furniture and related products). However, the report also noted that 14 of 18 industries reporting were expanding.